A $7.8 trillion cash pile sits in US money market funds, earning, rolling, waiting. The Federal Reserve began this easing cycle on Sept 18, 2024, and it’s now been 522 days since that first cut.
Looking at historical market movements, we’re entering a window whereby funds have typically started to rotate back into riskier assets. Bitcoin analyst Matthew Hyland made exactly this claim on X over the weekend.
Historically around 500-1000 days after the FED begins rate cuts the liquidity begins to leave the money market funds and flow out into the markets.
The calendar supports the setup, but the incentives will decide the outcome.
The latest weekly read from the Investment Company Institute puts total money market fund assets at $7.791T for the week ended Feb 18, 2026, with $6.405T in government funds, $1.242T in prime funds, and $0.144T in tax exempt funds, a distribution that tells you where the demand has preferred to sit, close to Treasurys and close to daily liquidity.
We can view this as âcash on the sidelines,â a reserve that can stampede into risk assets once the Fed turns the corner.
However, the cash is a yield product; it has incentives, mandates, a monthly statement, and a reason it accumulated here in the first place. Rates rose, yields followed, and cash found a home with fewer questions attached, and now rates are stepping down, and the question shifts from size to direction.
The effective federal funds rate sits at 3.64% in the January 2026 monthly print, down from 4.22% in September 2025, a simple compression of return that changes what âsafeâ pays.
You can see it in money fund yield tracking as well. Craneâs index sits around 3.58% for the week ended Jan 2, 2026, a quieter yield that narrows the gap between waiting and reaching. The cash pile still looks tall on a chart, and the path under it is a slope, and slopes create motion.
The easy reservoir that used to sit in the Fedâs overnight reverse repo facility has already drained down to almost nothing, $0.496B on Feb 20, 2026, so the next âliquidity storyâ lives in portfolio choices rather than a mechanical facility unwind.
The cash can stay where it is, roll into duration, move into credit, drift into equities, or leak into crypto rails, and each path has a different set of consequences.
The cash pile has a job, and the job shapes the exit
Money market funds hold more than one kind of money. ICIâs weekly split shows $3.082T in retail money market funds and $4.709T in institutional funds, and institutional cash carries a different posture, it pays vendors, it backs credit lines, it covers payroll cycles, it sits there as policy, and those policies move slower than memes.
That composition sets the baseline for the flow math. A 1% move in total money market assets equals about $78B, a 5% move equals about $390B, a 10% move equals about $779B, and those numbers get interesting even before you argue about where they land, since they tell you how large the gear is that the rate path is trying to turn.
The incentive lever is yield, which follows the Fedâs path.
Morgan Stanley frames it in the plain language investors actually live with, money market yields track the Fed, cuts compress returns, and investors reevaluate where they sit as the path evolves. The forward-looking part is simple: the more the path points down, the more the ledger begins to ask, âWhat else pays,â and the answer changes by risk tolerance and by mandate.
Macro liquidity watchers will also keep one eye on the Treasuryâs own cash balance and the Fedâs balance sheet, since both shift the waterline in reserves and financing.
The Fedâs balance sheet, WALCL, stands at $6.613T, and the Treasury General Account weekly average sits around $912.7B for the same week, both series that traders read like gauges, each movement a reminder that cash is a system with valves.
Rotation paths, duration first, risk later, crypto as a thin rail
A rate-cutting cycle creates a menu, and the first courses look like duration and credit. Morgan Stanley points out that in prior easing windows, investment-grade bonds beat cash equivalents between the end of hikes and the end of cuts, providing a grounded alternative to the idea that money-market outflows automatically become equity or crypto inflows.
That detail is important for Bitcoin, since it depends on marginal flow, and marginal flow depends on which bucket investors choose first. In a world where cash rolls into bonds, the rotation still exists, and the risk bid looks more measured. Though when cash skips the bond aisle and reaches for risk, the rotation becomes a discontinuity.
Crypto has its own liquidity mirror. The stablecoin market stands at $308B, with USDT at $186B, a balance sheet for on-chain âcashâ that can expand when risk appetite rises, and contract when the system tightens.
Stablecoins carry a different role than money market funds, and the comparison helps; each is a wrapper for short-term value storage, and each wrapper moves when the opportunity cost shifts.
Bitcoin also has a relatively new intake pipe in US spot ETFs. Inflow and outflow totals become a ruler for the money market scenario math, since you can compare a hypothetical $39B shift to a realized $61.3B of ETF intake, and you can see how quickly the scale begins to matter.
Three scenarios, one cash pile, different consequences
Sticky cash, cautious Fed, slow drift. Inflation progress stays uneven, and policy makers stay alert to upside inflation risks, an attitude reflected in the Financial Times’ coverage that even included discussion of the possibility of hikes as a risk scenario.In this path, money market yields slide slowly, operational cash remains operational, and outflows run small, roughly 0 to 2% over 12 months, about $0 to $156B, with much of that moving into bond ladders and high-grade duration as return differentials shift.Bitcoinâs path in this scenario follows broader risk sentiment and the steady cadence of ETF demand, and the âcash wallâ stays mostly a photograph.Soft landing, faster cuts, search for return. The Fedâs own projections provide a map for how that could look. The December 2025 Summary of Economic Projections shows a median federal funds rate at 3.4% by the end of 2026 and 3.1% by the end of 2027, a longer slope that compresses the yield earned by waiting.In this path, the trigger looks like another step down in money fund yields, and Craneâs index becomes a weekly gauge for how quickly the incentive changes.Outflows land in a wider set of buckets, and the range grows, 5 to 10% over 12 months, about $390B to $779B. A split that keeps faith with institutional behavior can still send the majority into bonds and credit, and a smaller slice into equities, and a thin slice into crypto rails, and even a 0.5% share of total money market assets translates to about $39B.
In this scenario, Bitcoin becomes a flow instrument, and the story shifts toward market microstructure, incremental supply meets incremental demand, and price tends to respond in jumps rather than in steps.
Recession cut, flight to safety first, policy relief later. Rate cuts arrive with a darker macro soundtrack, and risk assets wobble, and cash demand rises as investors rebuild buffers.In that world, money market funds can grow, and a 3 to 8% increase in AUM becomes plausible, about +$234B to +$623B, and the rotation story flips into a hoarding story, at least for the first phase.Bitcoinâs response in this path looks like a whipsaw, drawdown risk first, recovery potential later, and the timing becomes the dominant variable.
Across all three scenarios, the common denominator is incentive. The Fed began cutting on Sept 18, 2024, with a 50 basis point move to a 4.75 to 5.00% target range, and the calendar since then has moved faster than the cash has moved, which leaves the market watching the yield slope and the allocation choices.
The global backdrop, and what to watch each week, the gauges that move first
Macro stories age well when they rest on a durable context.
The IMFâs January 2026 update projects 3.3% global growth in 2026 and 3.2% in 2027, a baseline that supports a soft-landing narrative even as regional risks remain, and that matters for risk assets, since growth expectations influence allocation behavior as much as yields do.
Meanwhile, the plumbing gauge that powered many liquidity stories earlier in the decade, the Fedâs ON RRP facility, has already drained close to zero, which shifts attention back to the slower gears, money market composition, institutional constraints, and the relative return of bonds, equities, and alternative assets.
It also explains why the âcash on the sidelinesâ framing feels both true and incomplete. The cash exists, but its exit is not mechanical. It requires decisions, and those decisions follow incentives.
To track that process, a small set of recurring gauges matters more than headlines:
Money market assets and composition: ICIâs weekly report provides the base map, total AUM, government vs. prime share, and the retailâinstitutional split.
Money fund yields: Craneâs index offers a compact read on the incentive to stay put.
The rate path: The effective federal funds rate shows what âcashâ actually earns.
Forward guidance: The Fedâs projected destination in the SEP anchors expectations.
System plumbing: ON RRP, WALCL, and WTREGEN indicate how reserves and liquidity are shifting.
Cryptoâs internal cash: Stablecoin supply, plus daily and cumulative Bitcoin ETF flows, show how much of that rotation is reaching digital rails.
Taken together, these gauges offer a cleaner way to talk about âliquidity,â and keep us anchored when the market tries to turn it into a slogan.
The market has a way of turning a calendar into destiny, and a cash pile into a prophecy.
The better read comes from the incentives and the pipes, yields that slide, wrappers that reprice, mandates that loosen or hold, and a set of flow rails that turn small percentages into large numbers when they meet an asset built for marginal demand.
